Prime Rate Climbed to 4.45%: What Changed for Variable-Rate Debt in 7 Months
A HELOC you opened in January at Prime minus 0.5% now costs you 3.95% annually, not the 3.44% you were paying seven months ago. That's a 15% jump in interest expense on the same balance. The shift happened between February and August 2026 as the Bank of Canada raised its policy rate three times, pushing Canadian Prime from 3.94% to 4.45%.
Variable-rate borrowers felt the squeeze immediately. Every prime-linked product reset within the billing cycle: lines of credit, Home Equity Lines of Credit (HELOCs), variable-rate mortgages trading on prime, even business operating lines. The monthly change wasn't dramatic on any single increase, but compounded over seven months, a $50,000 HELOC balance that cost $145.83 per month in interest in January now costs $164.58. That's an extra $225 annually per $50,000 borrowed.
The Timeline That Got Us Here
The Bank of Canada held its overnight rate at 2.45% through December 2025. In February 2026, it moved to 2.70%, citing stronger-than-expected employment and sticky services inflation. Prime followed to 4.2%. A second hike in May brought the overnight rate to 2.95%, pushing prime to 4.45%. The third adjustment in August landed the overnight rate at 3.0%, with prime holding at 4.45%, according to Place Real Estate as of February 16, 2026.
Most variable-rate products in Canada price off prime, not the overnight rate directly. The spread varies: HELOCs typically sit at Prime minus 0.5% to Prime plus 0.5%, depending on credit profile and collateral. Variable mortgages range from Prime minus 1.2% to Prime minus 0.3% for well-qualified borrowers. Business lines often trade at Prime plus 1.0% to Prime plus 2.5%.
That spread matters more now. A borrower at Prime minus 1.0% saw their rate climb from 2.94% in January to 3.45% in August. A borrower at Prime plus 0.5% went from 4.44% to 4.95%. The percentage-point change is identical, but the effective cost increase hits harder at higher absolute rates.
What This Means for Your Monthly Payments
Variable-rate mortgages split into two types: adjustable-rate and adjustable-payment. With adjustable-rate, your payment stays fixed and the amortization stretches when rates rise. You're paying more interest, less principal, and the back-end cost compounds. With adjustable-payment, the payment resets immediately and you see the change in your bank account within 30 days.
A $400,000 variable mortgage at Prime minus 0.8% that started in January at 3.14% is now running at 3.65%. On a 25-year amortization, that's an extra $109 per month if the payment adjusts, or roughly 5,200 additional payments at the end if it doesn't. Neither option feels good, but one is invisible until renewal.
HELOCs recalculate interest daily and bill monthly, so every rate hike shows up in the next statement. If you're carrying a $75,000 balance and paying interest-only, your minimum monthly obligation rose from $218 in January to $247 in August. That's $348 annually on the same debt with zero new borrowing.
Three Things to Do Before Year-End
Confirm your current spread. Pull your mortgage or HELOC paperwork and find the exact formula. If your agreement says "Prime minus 0.5%," you're at 3.95% today. If it says "Prime," you're at 4.45%. That number drives every calculation. Do not assume you know it.
Calculate your trigger rate if you have an adjustable-rate mortgage. That's the rate at which your fixed payment no longer covers the interest, and your principal balance starts growing instead of shrinking. Most lenders notify you when you hit it, but some don't. The math: divide your current monthly payment by your remaining balance, multiply by 12, then by 100. If that figure is below your current rate, you've crossed the trigger.
Compare your variable rate to today's fixed offerings. Five-year fixed insured mortgages ranged from 3.94% to 4.09% as of August 2026, according to WOWA.ca. If your variable rate is now within 0.3% of that, the traditional advantage of variable over fixed has disappeared. At 3.65%, you're still below. At 4.3%, you're not.
A HELOC you opened in January at Prime minus 0.5% now costs you 3.95% annually, not the 3.44% you were paying seven months ago. That's a 15% jump in interest expense on the same balance. The shift happened between February and August 2026 as the Bank of Canada raised its policy rate three times, pushing Canadian Prime from 3.94% to 4.45%.
Variable-rate borrowers felt the squeeze immediately. Every prime-linked product reset within the billing cycle: lines of credit, Home Equity Lines of Credit (HELOCs), variable-rate mortgages trading on prime, even business operating lines. The monthly change wasn't dramatic on any single increase, but compounded over seven months, a $50,000 HELOC balance that cost $145.83 per month in interest in January now costs $164.58. That's an extra $225 annually per $50,000 borrowed.
The Timeline That Got Us Here
The Bank of Canada held its overnight rate at 2.45% through December 2025. In February 2026, it moved to 2.70%, citing stronger-than-expected employment and sticky services inflation. Prime followed to 4.2%. A second hike in May brought the overnight rate to 2.95%, pushing prime to 4.45%. The third adjustment in August landed the overnight rate at 3.0%, with prime holding at 4.45%, according to Place Real Estate as of February 16, 2026.
Most variable-rate products in Canada price off prime, not the overnight rate directly. The spread varies: HELOCs typically sit at Prime minus 0.5% to Prime plus 0.5%, depending on credit profile and collateral. Variable mortgages range from Prime minus 1.2% to Prime minus 0.3% for well-qualified borrowers. Business lines often trade at Prime plus 1.0% to Prime plus 2.5%.
That spread matters more now. A borrower at Prime minus 1.0% saw their rate climb from 2.94% in January to 3.45% in August. A borrower at Prime plus 0.5% went from 4.44% to 4.95%. The percentage-point change is identical, but the effective cost increase hits harder at higher absolute rates.
What This Means for Your Monthly Payments
Variable-rate mortgages split into two types: adjustable-rate and adjustable-payment. With adjustable-rate, your payment stays fixed and the amortization stretches when rates rise. You're paying more interest, less principal, and the back-end cost compounds. With adjustable-payment, the payment resets immediately and you see the change in your bank account within 30 days.
A $400,000 variable mortgage at Prime minus 0.8% that started in January at 3.14% is now running at 3.65%. On a 25-year amortization, that's an extra $109 per month if the payment adjusts, or roughly 5,200 additional payments at the end if it doesn't. Neither option feels good, but one is invisible until renewal.
HELOCs recalculate interest daily and bill monthly, so every rate hike shows up in the next statement. If you're carrying a $75,000 balance and paying interest-only, your minimum monthly obligation rose from $218 in January to $247 in August. That's $348 annually on the same debt with zero new borrowing.
Three Things to Do Before Year-End
Confirm your current spread. Pull your mortgage or HELOC paperwork and find the exact formula. If your agreement says "Prime minus 0.5%," you're at 3.95% today. If it says "Prime," you're at 4.45%. That number drives every calculation. Do not assume you know it.
Calculate your trigger rate if you have an adjustable-rate mortgage. That's the rate at which your fixed payment no longer covers the interest, and your principal balance starts growing instead of shrinking. Most lenders notify you when you hit it, but some don't. The math: divide your current monthly payment by your remaining balance, multiply by 12, then by 100. If that figure is below your current rate, you've crossed the trigger.
Compare your variable rate to today's fixed offerings. Five-year fixed insured mortgages ranged from 3.94% to 4.09% as of August 2026, according to WOWA.ca. If your variable rate is now within 0.3% of that, the traditional advantage of variable over fixed has disappeared. At 3.65%, you're still below. At 4.3%, you're not.
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